TRENTON – February 8, 2016 – (RealEstateRama) — Acting Attorney General John J. Hoffman announced today that New Jersey has joined a major multi-state and federal settlement with mortgage lender and servicer HSBC that resolves allegations the company engaged in abusive business practices in the handling of its mortgage loans.

A global banking and financial services company, HSBC allegedly committed mortgage loan origination, servicing and foreclosure abuses that harmed consumers in New Jersey and across the country. The settlement announced today provides for a monetary payment of $100 million, of which more than $59 million is designated for direct payments to HSBC borrowers in New Jersey and across the U.S. for past foreclosure abuses. The settlement also provides for $370 million in consumer relief, including loan modifications and other relief for borrowers in need of assistance. Other terms include the imposition of rigorous mortgage servicing standards on HSBC, and the assignment of oversight authority to an independent monitor to ensure compliance.

“This settlement holds HSBC accountable for its past abusive, unacceptable business practices, and provides direct relief to New Jersey borrowers,” said Acting Attorney General Hoffman. “In addition, the settlement raises the bar by including tough new mortgage servicing standards. In the future, HSBC must treat its borrowers more fairly than it has in the past, and an independent monitor will help to ensure that happens.”

The overall $470 million HSBC agreement largely mirrors the 2012 National Mortgage Settlement reached in February 2012 between the federal government, 49 states (including New Jersey), and the five largest national mortgage servicers. That settlement provided borrowers across the U.S. with more than $50 billion in direct relief while creating new servicing standards and implementing independent oversight. A subsequent multi-state and federal settlement with SunTrust Mortgage Inc. worth nearly $1 billion was announced in June 2014. New Jersey also was party to that agreement.

In addition to New Jersey, the HSBC settlement involves 48 states, the District of Columbia, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development, and the Consumer Financial Protection Bureau.

The settlement requires HSBC to provide certain New Jersey borrowers, as well as borrowers in the 48 other participating states and the District of Columbia, with loan modifications or other relief.

The loan modifications – to be chosen by HSBC from an extensive list of options – include principal reductions and refinancing for underwater mortgages. HSBC will decide how many loans and which loans to modify, but must meet certain minimum targets.

Under the settlement, approximately 345 eligible New Jersey consumers – borrowers who had mortgage loans serviced by HSBC, encountered servicing abuses committed by the company and lost their homes to foreclosure between January 1, 2008 and December 31, 2012 – will be eligible for payment from the $59.3 million national fund created for the purpose.

The payment amount to individual HSBC borrowers will depend on how many borrowers file claims overall. Eligible borrowers will be contacted about how to quality for payments.

The HSBC settlement requires HSBC to substantially change how it services mortgage loans, handles foreclosures and ensures the accuracy of information it provides in related federal bankruptcy court proceedings. The terms will prevent past foreclosure abuses, such as “robo-signing”, improper documentation and lost paperwork.

The settlement’s consumer protections and standards include:

Making foreclosure a last resort by first requiring HSBC to evaluate homeowners for other loss mitigation options
Restricting foreclosure while the homeowner is being considered for a loan modification
Giving homeowners the right to appeal denials
Imposing procedures and timelines for the review of loan modification applications
Requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls
The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee HSBC’s compliance with the settlement terms for one year.

Smith will oversee implementation of the servicing standards required by the agreement, impose penalties of up to $1 million per violation (or up to $5 million for certain repeat violations) and issue public reports that identify whether HSBC complied or fell short of the standards imposed by the settlement.

For loans serviced by HSBC Bank USA, consumers with inquiries about the HSBC settlement should call 1-866-435-7085. For loans serviced by HSBC Mortgage Services, Household Finance, or Beneficial, consumers with questions should call 1-800-333-7023.

The agreement will be filed as a Consent Judgment in the U.S. District Court of the District of Columbia.

Deputy Attorney General Lorraine K. Rak, Chief of the Consumer Fraud Prosecution Section in the Division of Law, is representing the State in the HSBC matter.

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